This is one of those articles where you attempt to predict one thing, and then fairly soon you get proved wrong!
It’s been a little while since the last industry deal was done. It was a quiet start to the year, with very little in terms of any major activity. Then we had the EU Referendum vote, which appeared to put a number of industry acquisitions on hold. We braced. Nothing much changed.
Then the floodgates opened and there was a flurry of quite major industry deals. There was four in the space of just a few weeks. A highly unusual number in such a short space of time.
It’s all gone a bit quiet now though. There were a few rumours of a couple more industry deals that may happen, but those have gone quiet.
Given that we’re nearly into October, it might be the end of M&A season in the industry.
Done and dusted?
In most years, a lot of the deals done have been spread out throughout the year. No big glut like we saw earlier on in the year.
But it’s all gone very quiet on the speculation front. We’re heading into the last quarter now, and attentions for most companies will be turning to overall yearly performance and making sure that their year finishes strongly.
For me, M&A season in the industry is over for another year. On the whole, I would judge it as a fairly modest year, with deals that were newsworthy, but perhaps not industry-shattering on the scale of VEKA/Halo. The Clayton purchase of Romag was a pretty nifty one though.
Much more consolidation required
When I look at the wider state of the market, I still do see lots more room for consolidation. The supplier to installer ratio is largely unbalanced, with a fairly substantial number of fabricators producing less than 100 frames per week. This is becoming increasingly inefficient and unprofitable and will ultimately force some businesses to consider their future.
But there are also some very prime targets for take overs. Very much like the tech industry, there are some very innovative small to medium size companies doing great things that are naturally attractive acquisition targets.
I look at companies like Spitfire and their stunning aluminium doors filled with door tech. Clayton Glass and their connections to SageGlass and now Romag under their wing. Universal Arches with their market leading arching capabilities. It is companies like these that stand out for me as potential targets for mega businesses in our sector or outside private investors looking to cherry pick the best opportunities to grow their portfolios and profits.
I also think there is still room for another massive merger. There’s a lot of syscos out there, perhaps more than required. Not just in the world of PVCu, the aluminium and timber markets are seeing a revival that will make syscos in these two resurgent markets an attractive prospect.
There is though room for another mega-merger in the next couple of years. There will be a number of businesses looking to consolidate their market leading positions. Perhaps companies looking to extended their reach into new markets and take advantage of favourable trading conditions.
The time is right for buying, but perhaps not this year now.
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